Improving airline travel in Europe

Posted on June 11, 2013 by aviyer2010

An article in the Wall Street Journal (June 3,2013) describes the delays in Europe caused by the 37 countries with 63 air traffic control units that do not have a common authority. Improving performance requires coordinating landings and takeoffs with slot availability, but that requires independent authorities to coordinate who have no incentives to do so. The current approach is to invest in technology, but that is expected to result in little benefit in the absence of coordination. How should the benefits of improved performance be shared across the independent units to create the incentive for cooperation ? Should airlines be permitted to pay individual entities in the system to reap the benefits of improvement in the travelling customer’s satisfaction ?

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Palm oil using manufacturer constraints impact Indonesia’s forests

Posted on June 11, 2013 by aviyer2010

An article in Bloombergbusinessweek (June 3,2013) describes sourcing restrictions for palm oil by Nestle, Unilever and Cargill which bans palm oil grown in virgin rain forest land. The impact is a move by the Indonesian government to ban virgin rain forest plantation across the country to preserve palm oil markets. But conflicting local definitions of virgin rain forest land means uncertain sourcing verification. This is also causing manufacturers to move production out of the country to Sub-Saharan African locations with poor enforcement. Is the global supply chain impact of palm oil sourcing beneficial or should palm oil use be reduced to save the rain-forests? Should manufacturers develop standards to define appropriate sourcing or leave it to local governments to develop such definitions ?

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Apple’s 30% commission elimination and price increase

Posted on June 11, 2013 by aviyer2010

An article in the Wall Street Journal (June 10, 2013) describes the Justice department’s claim that Apple’s 30% revenue sharing contract (uniform for all products Apple sells) is a violation of antitrust and uncompetitive. The article claims that when this revenue sharing contract and associated most-favored-nation pricing (i.e., the item cannot be sold by the publisher for a lower price elsewhere) was introduced, Amazon.com had a 90% market share. Elimination of this pricing was supposed to result in lower prices but, instead, increased average prices from $8.20 to $8.85. Does the approval of wholesale pricing, which letters etailers set retail prices and the prevention of revenue sharing seem rational if it results in higher consumer prices ? Since revenue sharing is purported to improve supply chain coordination and thus permit more efficiency, does preventing it make sense ? How should the consumer interest be protected in this space and should the author and publisher’s interests be protected too ?

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Are European manufacturers globally competitive in making premium components or products ?

Posted on May 29, 2013 by aviyer2010

An article in the Financial Times (May 29, 2013) describes a collection of Italian manufacturers – Luxottica for eyewear, Sogefi for premium auto parts and Guala Closures for premium bottle caps that prevent counterfeiting. They compete globally to make premium components and leverage both engineering skills as well as craftsmanship. The claim is that Italians value engineering and the profession attracts a large talent pool unlike other parts of Europe (e.g., UK which is claimed to have banking as the notable profession). Can Italian manufacturers, forced to become lean due to the recessionary climate in Europe, now be competitive enough to battle other locations for premium components or products ? Will the global demand sources in India and China value these products enough to maintain the premium necessary to maintain production in Europe ? Are there location specific production and skill networks that provides a competitive advantage to Italian manufacturing or will the introduction of design software enable a decoupling of design from manufacturing locations?

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US forests to fuel European power plants – a green supply chain ?

Posted on May 29, 2013 by aviyer2010

An article in the Wall Street Journal (May 28, 2013) describes exports of US forest generated pellets to replace coal in European power plants as Europe cuts down on fossil fuel use and tries to decrease emissions of carbon dioxide. But this supply chain also results in new trees being planted in US forests, that can absorb more carbon than mature trees. Is this substitution of wood pellets for coal, and new trees for old, a supply chain that improves the carbon footprint globally ? Given the jobs generated by the logging in the US, should that be included in any calculation of the “consumer welfare” effect of this supply chain ? How should the supply chain be monitored to ensure that “best practice” recommended by the European Union is followed by US loggers ?

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The emerging “internet of things” and opportunities

Posted on May 22, 2013 by aviyer2010

An article in WIRED magazine (June 2013) describes the emerging internet enabled devices across homes, factories, cities etc. They predict three stages – Stage 1 links devices to the internet, Stage 2 enables conditional actions (If-Then actions) between pairs of devices (such as a GPS on a phone alerting its presence to a retailer), Stage 3 would have a network of these internet enabled devices following rules of engagement with each other, autonomously, even enabling a network presence customized to the system’s human occupants. The article claims that these capabilities will unleash new business opportunities to enable efficiency, improve quality of life, reduce environmental impacts etc. How will supply chains leverage such logic to improve their performance ? Will software providers sell homeowners customized software logic to enable different levels of “quality of comfort” with associated monthly costs ? Will devices more to a “pay per use” mode of sales with ownership retained by the manufacturer ?

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Decreasing the $290 billion cost of poor drug adherence

Posted on May 22, 2013 by aviyer2010

A report in the Wall street Journal (May 21, 2013) quotes a $290 billion cost estimated by the New England Health Institute due to poor drug regimen adherence by 33% to 50% of the patients, thus increasing hospital or other medical costs. One solution proposed is to install Magnesium-Copper-Silicon sensors (the size of a grain of sand) in each pill that would confirm dosages are being followed. Other solutions include games and rewards such as charitable donations following adherence to prescribed regimens. Given that better adherence can decrease wasted costs, how should the benefits be shared to increase conformance ? Should third party companies be added to existing healthcare supply chains to verify or encourage conformance to prescribed dosages and be paid based on successful outcomes ? How should individual patients be incented to comply to improve their own health outcomes or should doctors be held responsible for patient conformance ?

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Vertical integration in the US global pharmacy supply chain and impact

Posted on May 22, 2013 by aviyer2010

An article in the Wall Street Journal (May 21, 2013) describes an alliance between Walgreens, Alliance Boots and AmerisourceBergen to consolidate their global purchasing of generic and branded pharmaceuticals and sell them through their US Walgreens retail stores and AllianceBoots European stores. The article claims that such consolidation of purchasing will enable better prices from manufacturers and lower logistics costs. But it also suggests that while it will increase retail availability it may not lower retail prices paid by consumers. Given the competitiveness of US retail, would it be optimal for Walgreens to increase margins and not lower prices to gain market share ? Given that one retailer has moved in this direction, would other distributors and retailers also be expected to form such vertically integrated supply chains to compete ? How should manufacturers respond to such supply chain changes to maintain their profitability ?

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Sustainable metrics at REI and associated insights

Posted on May 21, 2013 by aviyer2010

An article by Kevin Hagen (http://www.sustainablebrands.com/news_and_views/articles/what-i-learned-about-sustainability-rei-part-2-metrics-over-intuition?utm_source=newsletter&utm_medium=businessweekly&utm_campaign=may20) describes REI’s tracking of greenhouse gas emissions in 2011. The company realized that while 10 % of these emissions were caused by transportation of its products, 15 % were the result of employee commutes to work at the company and its stores. This caused a realization that increased gas prices would play a role in employee retention and that moves to reduce individual commutes had to be framed more as a risk management strategy rather than just as something that would be good to do. Do you expect similar results for other retailers (grocery, apparel etc) ? If so, would it suggest a greater investment in public transportation by companies as they seek to reduce their collective carbon footprints ?

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Cadmium in Chinese rice – what should a consumer do ?

Posted on May 20, 2013 by aviyer2010

An article in the New York Times (May 20, 2013) describes the problem of ‘cadmium rice” – a report that claims that 44 % of the rice tested had twice the level of cadmium (0.4 milligrams per kilogram) as considered acceptable. Chinese consumers were asked to avoid consuming food from one region but to diversify their food sources. The sources of cadmium are claimed to be zinc mining and chemical wastes/ But demand for cadmium is driven by its use in batteries that are driven by the demand for cell phones and other electronics. How much of the cost of cleaning up the environment to guarantee safe food should be borne by the consumer of the electronics products that use the metals ? Is diversification of food sources by rice consumers the solution to this problem or should the brands of rice with high cadmium levels be banned and destroyed, even if it increases food prices ? What safeguards should be implemented by battery manufacturers and users to ensure compliance with environmental laws ?

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